Uncovering your hidden occupancy costs

Senior managers at large companies may not believe that they can have much impact on the "bricks and mortar" of their cost structure. They may even think that occupancy costs are too insignificant to worry about, too technical to analyze, and too fixed to control. But as real estate consultant Mahlon Apgar argues, occupancy costs can hurt a company's earnings, share value, and overall performance. On the other hand, every dollar saved drops straight to the bottom line. Shearson Lehman Brothers, for example, has found that it can save as much as $20 million annually by reducing occupancy costs in its branch offices and headquarters. Managing occupancy costs isn't easy. But it is timely. As companies strive to improve productivity by consolidating functions and downsizing staff, they are saddled with excess office space. Expansions abroad present completely different market conditions that put a premium on reducing occupancy costs. At the same time, the changing nature of work is challenging deeply held beliefs about the workplace, and, consequently, traditional expectations of office space are giving way to innovations that are less costly and more productive. To manage occupancy costs, managers must be able to identify their components, measure their impact, understand what drives them, and develop options to change them. Four basic tools help diagnose problems: a cost history, a loss analysis, a component analysis, and a lease aging profile. Understanding cost drivers like leasing, location, and layout can give executives the insights they need to reduce occupancy costs while improving the effectiveness of facilities to support day-to-day operations.     

Health care and TEM managing costs of fixed and mobile communications

Steps to implementing an outsourced telecom or wireless expense management (TEM or WEM) solutions should include: Review of the organization's prior experience with these solutions. Promotion of the approach across the organization. Assignment of an internal owner of the TEM or WEM functions. The decision as to which activities to outsource. Due diligence in sourcing the TEM or WEM solution.     

Cutting costs in your own backyard: opportunities in financial services

Hospitals looking to reduce cost and improve performance in financial services should focus on these areas: Treasury banking services costs and fees. The possibility of a revenue-generating vendor payment solution. The accounts payable process.     

The four truths of the storyteller

A well-told story's power to captivate and inspire people has been recognized for thousands of years. Peter Guber is in the business of creating compelling stories: He has headed several entertainment companies--including Sony Pictures, PolyGram, and Columbia Pictures--and produced Rain Man, Batman, and The Color Purple, among many other movies. In this article, he offers a method for effectively exercising that power. For a story to enrapture its listeners, says Guber, it must be true to the teller, embodying his or her deepest values and conveying them with candor; true to the audience, delivering on the promise that it will be worth people's time by acknowledging listeners' needs and involving them in the narrative; true to the moment, appropriately matching the context--whether it's an address to 2,000 customers or a chat with a colleague over drinks--yet flexible enough to allow for improvisation; and true to the mission, conveying the teller's passion for the worthy endeavor that the story illustrates and enlisting support for it. In this article, Guber's advice--distilled not only from his years in the entertainment industry but also from an intense discussion over dinner one evening with storytelling experts from various walks of life--is illustrated with numerous examples of effective storytelling from business and elsewhere. Perhaps the most startling is a colorful anecdote about how Guber's own impromptu use of storytelling, while standing on the deck of a ship in Havana harbor, won Fidel Castro's grudging support for a film project.     

Three questions you need to ask about your brand

Traditionally, the people responsible for positioning brands have concentrated on the differences that set each brand apart from the competition. But emphasizing differences isn't enough to sustain a brand against competitors. Managers should also consider the frame of reference within which the brand works and the features the brand shares with other products. Asking three questions about your brand can help: HAVE WE ESTABLISHED A FRAME?: A frame of reference--for Coke, it might be as narrow as other colas or as broad as all thirst-quenching drinks--signals to consumers the goal they can expect to achieve by using a brand. Brand managers need to pay close attention to this issue, in some cases expanding their focus in order to preempt the competition. ARE WE LEVERAGING OUR POINTS OF PARITY?: Certain points of parity must be met if consumers are to perceive your product as a legitimate player within its frame of reference. For instance, consumers might not consider a bank truly a bank unless it offers checking and savings plans. ARE THE POINTS OF DIFFERENCE COMPELLING?: A distinguishing characteristic that consumers find both relevant and believable can become a strong, favorable, unique brand association, capable of distinguishing the brand from others in the same frame of reference. Frames of reference, points of parity, and points of difference are moving targets. Maytag isn't the only dependable brand of appliance, Tide isn't the only detergent with whitening power, and BMWs aren't the only cars on the road with superior handling. The key questions you need to ask about your brand may not change, but their context certainly will. The saviest brand positioners are also the most vigilant.     

How to have an honest conversation about your business strategy

Too many organizations descend into underperformance because they can't confront the painful gap between their strategy and the reality of their capabilities, their behaviors, and their markets. That's because senior managers don't know how to engage in truthful conversations about the problems that threaten the business--and because lower-level managers are afraid to speak up. These factors lie behind many failures to implement strategy. Indeed, the dynamics in almost any organization are such that it's extremely difficult for senior people to hear the unfiltered truth from managers lower down. Beer and Eisenstat present the methodology they've developed for getting the truth about an organization's problems (and the truth is always embedded within the organization) onto the table in a way that allows senior management to do something useful with it. By assembling a task force of the most effective managers to collect data about strategic and organizational problems, the senior team sends a clear message that it is serious about uncovering the truth. Task force members present their findings to the senior team in the form of a discussion. This conversation needs to move back and forth between advocacy and inquiry; it has to be about the issues that matter most; it has to be collective and public; it has to allow employees to be honest without risking their jobs; and it has to be structured. This direct feedback from a handful of their best people moves senior teams to make changes they otherwise might not have. Senior teams that have engaged in this process have made dramatic changes in how their businesses are organized and managed--and in their bottom-line results. Success that begins with honest conversations begets future conversations that further improve performance.     

Make your enemies your allies

Rivalries in the workplace can be destructive to both personal career growth and group success. Many attempts to reverse rivalries fail because of the complex way emotion and reason operate in the building of trust. Using a method called the 3Rs, an effective leader can turn a rival into a collaborator, setting the stage for a healthy work life while driving fresh thinking within an organization. Step 1 of the method is redirection, shifting a rival's negative emotions away from the adversarial relationship. This creates an opening for Step 2, reciprocity, through which a relationship can be established. Here, the essential principle is to give before you ask--offering a rival something of clear benefit and "priming the pump" for a future return that requires little effort on the rival's part. Step 3, rationality, sets expectations of the new relationship so that efforts made using the previous steps don't come off as disingenuous. A rival is encouraged to see collaborative opportunities from a reasoned standpoint. A key advantage of the 3Rs is that the method can work to reverse all kinds of rivalries, including those with subordinates, peers, and superiors.     

Manage your energy, not your time

As the demands of the workplace keep rising, many people respond by putting in ever longer hours, which inevitably leads to burnout that costs both the organization and the employee. Meanwhile, people take for granted what fuels their capacity to work--their energy. Increasing that capacity is the best way to get more done faster and better. Time is a finite resource, but energy is different. It has four wellsprings--the body, emotions, mind, and spirit--and in each, it can be systematically expanded and renewed. In this article, Schwartz, founder of the Energy Project, describes how to establish rituals that will build energy in the four key dimensions. For instance, harnessing the body's ultradian rhythms by taking intermittent breaks restores physical energy. Rejecting the role of a victim and instead viewing events through three hopeful lenses defuses energy-draining negative emotions. Avoiding the constant distractions that technology has introduced increases mental energy. And participating in activities that give you a sense of meaning and purpose boosts the energy of the spirit. The new workday rituals succeed only if leaders support their adoption, but when that happens, the results can be powerful. A group of Wachovia Bank employees who went through an energy management program outperformed a control group on important financial metrics like loans generated, and they reported substantially improved customer relationships, productivity, and personal satisfaction. These findings corroborated anecdotal evidence gathered about the effectiveness of this approach at other companies, including Ernst & Young, Sony, and Deutsche Bank. When organizations invest in all dimensions of their employees' lives, individuals respond by bringing all their energy wholeheartedly to work -and both companies and their people grow in value.     

When your contract manufacturer becomes your competitor

PC maker Lenovo started out as a distributor of equipment made by IBM and other companies; now it has formed a joint venture with IBM and will eventually affix its own logo to its computers. Shanghai Automotive Industry Corporation (SAIC) started out manufacturing vehicles for Volkswagen and GM; now it's preparing to sell its own cars in China, Europe, and North America. Lenovo and SAIC represent a host of formerly anonymous makers of brand-name products that are breaking out of their defined roles and pushing the brands themselves aside. In this article, the authors explore the double-edged relationships original equipment manufacturers (OEMs) forge with their contract manufacturers (CMs). On the one hand, an OEM can reduce its labor costs, free up capital, and improve worker productivity by outsourcing all the manufacturing of a product. The company can then concentrate on value-adding activities--research and development, product design, and marketing, for instance. On the other hand, an OEM that retains a contract manufacturer may find itself immersed in a melodrama replete with promiscuity (the ambitious CM pursues liaisons with other OEMs), infidelity (the OEM's retailers and distributors shift their business to the upstart CM), and betrayal (the brazen CM transmits the OEM's intellectual property to the OEM's rivals or keeps it for itself when the contract is up). OEMs cannot simply terminate their outsourcing arrangements--they need contract manufacturers in order to keep specializing, adding value, and staying competitive. But OEMs can manage these relationships so that they don't become weak or the CMs too strong. Doing so requires modesty about revealing trade secrets; caution about whom one consorts with; and a judicious degree of intimacy, loyalty, and generosity toward partners and customers.     

See your brands through your customers' eyes.

Subaru markets an L.L. Bean Outback station wagon. Dell stamps Microsoft and Intel logos on its computers. Such inter-weaving of different companies' brands is now commonplace. But one of the central tools of brand management-portfolio mapping--has not kept pace with changes in the marketplace. Most conventional brand maps include only those brands owned by a company, arranged along organizational lines with little regard for how the brands influence customer perceptions. In this article, the authors present a new mapping tool--the brand portfolio molecule--that reveals the way brands appear to customers. The brand portfolio molecule includes all the brands that factor into a consumer's decision to buy, whether or not the company owns them. The first step in creating a brand portfolio molecule is to determine which brands should or should not be included. The second step is to classify each brand by asking five key questions: 1) How important is this brand to customers' purchase decisions about the brand you're mapping? 2) Is its influence positive or negative? 3) What market position does this brand occupy relative to the other brands in the portfolio? 4) How does this brand connect to the other brands in the portfolio? 5) How much control do you have over this brand? The last step is to map the molecule using a 3-D modeling program or by hand with pen and paper. Individual brands take the form of atoms, and they're clustered in ways that reflect how customers see them. The usefulness of the tool lies in its ability to show the many forces that influence a customer's buying decision--and to provide a powerful new way to think about brand strategy.